Dean Foods Company
) reported adjusted earnings of 40 cents per share for the fourth
quarter of fiscal 2012, substantially beating the Zacks Consensus
Estimate of 30 cents a share. The company's quarterly earnings
increased approximately 48% compared with the year-ago earnings
of 27 cents per share. On a reported basis, including one-time
items, the company registered earnings of 20 cents per share.
The company's robust fourth-quarter results reflect continued
growth momentum across its business segments as well as intense
focus on cost control and better pricing.
Quarter in Detail
Dean Foods' adjusted net sales increased 3.7% year over year
to $3,417.8 million compared with net sales of $3,296.0 million
in the comparable prior-year quarter. The increase was primarily
due to the passing of higher dairy commodity costs at Fresh Dairy
Direct to customers and strong top-line performance at WhiteWave.
The company's quarterly net sales also swept past the Zacks
Consensus Estimate of $3,377.0 million.
Adjusted operating income for the quarter surged 16% to $157.0
million from the prior-year quarter's $135.0 million. The
improvement was an outcome of disciplined expense control on all
fronts throughout the organization.
Consequently, Dean Foods' adjusted operating margin for the
quarter expanded 50 basis points to 4.59% compared with 4.09% in
the comparable prior-year quarter.
The company ended the fiscal with cash and cash equivalents of
$79.0 million, long-term debt of $3,102.8 million and
shareholders' equity of $466.9 million. During the fiscal, the
company generated $384.0 million of cash from operations, while
free cash flow totaled $156.0 million. Capital expenditures for
the twelve month period decreased to $254.0 million compared with
$326.0 million in fiscal 2011.
Further, the company remains focused on curtailing its overall
leverage. As of the end of the third quarter, the company's
funded debt to EBITDA ratio, as defined by its credit agreements,
was 3.54x, lower than its maximum leverage covenant ratio of
5.50x, which suggests that the company now has more financial
flexibility to service its debt.
Dean Foods expects the momentum to continue across all its
business segments in fiscal 2013. The company anticipates
operating income to grow in the low-to-mid single digit range
versus the rebased fiscal 2012 operating income of $257.0
In a nutshell, in addition to being hopeful about such
performances at the segments, the company is focusing on
efficiency and leverage reduction to drive both operating income
and earnings per share. Adjusted earnings (excluding WhiteWave's
operating results) in the first quarter of fiscal 2013 are
expected to be in the range of 22-27 cents per share.
For fiscal 2013, the company is anticipating adjusted earnings
in between $1.00 and $1.10 per share.
We believe that Dean Foods has taken strategic steps to
optimize its capital allocation and concentrate more on core
businesses. The recent IPO of its subsidiary has provided Dean
Foods access to capital for funding growth, enhance its liquidity
position, maximize its value and improve debt finance.
Moreover, Dean Foods continues to make headway with its
efforts to achieve the lowest cost position in the industry. The
company has benefited from its continued focus on cost reduction
initiatives across the businesses.
On the flip side, in recent years, the consolidation of the
retail grocery industry has led to increased competition among
dairy product suppliers. In such a situation, Dean Foods faces
stiff competition at the processor level, in all major product
lines and geographic markets. Dean Foods currently has a Zacks
Rank #3 (Hold).
Other Stocks Worth Considering
Besides Dean Foods, other stocks in the food category business
that are expected to perform well include:
J&J Snack Foods Corporation
) Earnings ESP stands at +5.00% and it carries a Zacks Rank #1
) has an Earnings ESP of +0.97% and a Zacks Rank #2 (Buy).
) with an Earnings ESP of +71.43%, holds a Zacks Rank #3
Our proven model shows that a company may beat the earnings if
it has the right combination of two key components - Positive
Earnings ESP (Read:
Zacks Earnings ESP: A Better Method
) and a Zacks Rank #1, #2 and #3.
ADECOAGRO SA (AGRO): Free Stock Analysis
DEAN FOODS CO (DF): Free Stock Analysis
J&J SNACK FOODS (JJSF): Free Stock Analysis
KELLOGG CO (K): Free Stock Analysis Report
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